TRANSCRIPT
U.S. Department of Education Webinar
Recovery Act Technical Assistance Web Conference Series
“PROCURING GOODS AND SERVICES WITH FEDERAL EDUCATION GRANT FUNDS”
September 13, 2010
Otis Wilson: Good afternoon, ladies and gentlemen, and welcome to this afternoon's United States Department of Education's Recovery Act Technical Assistance Web Conference. Today's webinar is entitled Procuring Goods and Services with Federal Education Grant Funds. I am Otis Wilson, your moderator today. I remind you that our webinars are archived on our website. The web address is listed on our final slide. Also, at select the “ED Recovery Act” button, which is on the right side of your screen, and you will find many other links to important Recovery Act information as well. You may want to note an upcoming webcast. On Tuesday, October 19, we will be featuring the Federal Funding Accountability and Transparency Act Requirements webinar. Please join us.
As always your feedback is most important and very helpful. We want to know if we are meeting your needs with each webinar. Additionally, please let us know if there are other topics you would like presented. The final slide has the web address for the link to the evaluation.
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With me this afternoon is my colleague representing the Office of the Secretary, Risk Management Service, Ms. Cynthia Bond-Butler and from the Office of the General Counsel, Mr. Peter Wathen-Dunn. We will be presenting this important information. Now I'd like to welcome Cynthia to get us started.
Cynthia Bond-Butler: Thank you, Otis. Good afternoon. This webinar presentation is designed to provide grantees and sub-grantees with an overview of Federal requirements and guidance for the procurement of goods and services using Federal education grant funds. With a significant increase in Federal funding, provided under the American Recovery and Reinvestment Act, or ARRA, grantees and sub-grantees have a heightened responsibility to ensure that procurements using ARRA funds are conducted in compliance with the Education Department General Administration Regulations, or EDGAR, requirements, and in accordance with sound business practices.
Today, you will receive a basic refresher on the EDGAR procurement requirements. We will review the commonly identified procurement weaknesses found in audits and reviews, and understand how they potentially impact procurement operations. And you will hear about best practices in procurement identified by government and leading companies that have been proven to increase the effectiveness and efficienciesof an organization's procurement system and processes.
What are the implications of ARRA on procurements using Federalgrant funds? In general, the procurement requirements under EDGAR apply to the use of ARRA funds when procuring goods and services, as with otherEDgrants. However, there are a few additional requirements per the ARRA legislation that are important to highlight.
The first is Section 1554, Special Contracting Provisions. This provision states that all contracts awarded using ARRA funds shall be awarded as fixed-price contracts using competitive procedures to the maximum extent possible. ARRA enforces the requirement for competition that already exists in EDGAR that we will discuss later in this presentation. With respect to fixed-price contracting, EDGAR requires fixed-price contracts when awarding contracts using sealed bid procedures; however, EDGAR does allow for fixed-price cost reimbursement and, under limited conditions, time-and-material type contracts when awarding procurements used to competitively negotiate your proposals. So, it's important to emphasize here that when spending ARRA funds, the contract must be fixed-price and must be competed, again to the maximum extent possible. When these procedures are not followed, ARRA requires grantee agencies to post these transactions on their public ARRA website to promote transparency and accountability.
Additional ARRA requirements pertaining to procurement include Section 1604, Limit of Funds, which states in summary that ARRA funds may not be used by state or local governments, or any private entity to purchase any casinos or other gambling establishment, aquarium, zoo, golf course or swimming pool. Section 1605, Buy American, Use of American iron, steel, and manufactured goods, essentially requires that any project for construction, alteration, maintenance, or repair of a public building or a public work, using ARRA funds must use all of the iron, steel, and manufactured goods produced in the United States. There are exceptions that apply.
And finally Section 1606, Wage Rate Requirements, states that all laborers and mechanics employed by contractors or subcontractors on projects funded directly by, or assisted in whole or in part by, the Federal government using ARRA funds, shall be paid wages at the prevailing rates established by the U.S. Department of Labor for that locality. So while the specific ARRA provisions set forth additional requirements in the areas of funds restriction, using U.S.-made products and construction, and paying contractor employees a minimum wage as set by the U.S. government, you will see, as we go through this presentation, that the general principles of procurement when using ARRA funds in purchasing does not change.
With a significant increase in awards and expenditures under ARRA programs, the number of single audits has risen to include new recipients that are for the first time at the threshold for requiring single audits. This increase in audit activity makes the single audit process a key factor in determining whether the recipients are properly identified in reporting ARRA awards, are using ARRA funds for authorized purposes, and whether recipients have effective mitigation strategies in place to prevent instances of fraud, waste, and abuse.
Let's now discuss the Department of Education regulations that control procurements using Federal education grant funds. The two most important sections of EDGAR that apply are EDGAR Part 74, Administration of Grants and Agreements with Higher Education Institutions, Hospitals, and Other Non-Profit Organizations, authorized under OMB Circular A-110. And EDGAR Part 80, Uniform Administrative Requirements for Grants and Cooperative Agreements to State and Local Governments Authorized under OMB Circular A-102.
This slide presents a snapshot of the procurement guidance from EDGAR Parts 74 and 80. On the left of your screen lists the procurement requirements and standards for grantees and sub-grantees under EDGAR Part 74, and to the right are the procurement standards and requirements for all grantees under Part 80. There's a lot of information on this slide, but we want to demonstrate that there is much similarity among the procurement standards and requirements between the two parts. However, it is important to highlight here that, for state governments that are grantees, EDGAR Part 80.36(a) allows states to follow the same state policies and procedures for procurements using Federal funds as they use for non-Federalprocurements. When awarding contracts and purchase orders using Federal funds, states must include clauses required by Federal statute and any Federal executive orders. This flexibility was granted to states under OMB Circular A-102, Common Rule. For the remainder of this segment of the presentation, we will discuss some of the key procurements requirements in more detail.
The first is developing procurement policies and procedures for grantees and sub-grantees that fall under EDGAR Part 80.36(b). As I just explained, states will utilize their own state procurement policies and procedures. Other grantees and sub-grantees, such as local governments defined under EDGAR Part 80.3, are also required to use their own procurement procedures which are based on applicable state and local laws and regulations. The procurements awarded, however, must conform to applicable Federal law and must meet the minimum EDGAR Part 80.36 standards and requirements, which were outlined in the previous slide.
The grantees and sub-grantees that fall under EDGAR Part 74 are required to develop procurement policies and procedures as well. This slide lists the minimum EDGAR requirements that these grantees must include in their policies and procedures. First, the written procurement procedures must address topics such as how grantees will avoid making unnecessary purchases, lease versus buy analysis, and describe the solicitation processes. Next, the procedures must address how to encourage small business participation wherever possible. The procedures must include a discussion of the various types of procurement instruments available for use, such as fixed-price and cost reimbursement, and when each type should be used. The requirements for determining contractor responsibility must be included in the procedures. The determination process must include reviewing debarred and suspended vendor lists to ensure that the proposed contractor is not listed. The procedures must include a mechanism for providing Education with the ability to review all pre-award procurement documents upon request. And finally, the procedure shall, at minimum, include provisions to contract with faith-based organizations.
Next we have a requirement for grantees and sub-grantees to maintain an effective contract administration system. A contract administration system is a component of an agency's overall procurement system. It is critical to ensure that proper systems are in place to determine that the contractor’s performing in accordance with the terms of the contract and that the grantee agency has the ability to evaluate, assess, and document how a contractor is performing, both during the course of the contract and after the contractor has completed the work.
We have included this slide to emphasize the importance of creating an environment where grantees and sub-grantees procuring goods and services using Federal grant funds conduct business with integrity, fairness, and openness. To that end, grantees and sub-grantees are required under EDGAR to develop a written code of procurement ethics. At a minimum, all procurement personnel, which includes contracts staff and program officials, are not to participate in any procurement action if and when there's a conflict of interest, both real or apparent. Also procurement personnel are not to solicit or accept any gifts or favors from contractors or sub-contractors at any time. In the Federal government, government employees may accept gifts other than cash, not exceeding $20, as long as the total amount of gifts that thegovernment employee accepts from that outside source does not exceed $50 for the year. Such gifts of nominal value usually include items such as company paraphernalia, which are typically mugs, pens, computer mouse pads, etcetera. Grantees and sub-grantees may establish similar standards.
I mentioned earlier that agency policies and procedures must include a method for determining contractor responsibility. This slide provides more information on what factors should be considered when procurement staff are ready to decide on the award of procurement to a particular contractor or vendor. Consideration shall be given to contractorintegrity. Does the contractor have a history of delivering on the contract terms? Is the contractor in good standing in the marketplace? Compliance with public policy. Does the contractor have a history of complying with government decisions and participate when asked in the decision making process? Record of past performance. Does the contractor have a history of satisfactory performance with Federal grants? Financial and technical resources. Is the contractor financially solvent? Does the contractor have adequate resources or the ability to obtain the needed resources to perform under the contract? And debarment and suspension. Is the contractor listed on the excluded parties list? Later in this presentation, we will talk in more detail about debarment and suspension, and what grantees and sub-grantees are required to do.
Maintain contract award decision documentation. This is a very important requirement as it sets forth the history of the procurement from the requirements stage through the source selection process and on to the basis for the contracting officer's award decision. The need to maintain procurement records and contract award decision information becomes especially critical in the event of a vendor protest. In Federal procurement, there are many protest cases ruled in favor of the protestors simply because the government agency failed to produce the proper documentation as evidence of its position. It is also important for accountability and internal controls that grantee agencies maintain proper records in supporting evidence and have those records available for audit purposes.
The retention period for procurement records under EDGAR is three years aftergrantees and sub-grantees make final payments and all other pending matters are closed.
Competition. EDGAR requires that all procurements must be competed to the maximum extent practical, but what does this mean? This means that at every opportunity, grantees and sub-grantees must write requirements that do not give preference to any particular vendor or group of vendors or create an unfair competitive advantage. Also, the award will be made to the vendor who presents the best value to the grantee agency on behalf of the Department. Best value considers price, quality, and other factors determined to be important to the selection process.
Methods of procurement. EDGAR prescribes four basic methods of procurement -- small purchase, sealed bids, competitive proposals, and non-competitive proposals. This slide summarizes the basic conditions and requirements when choosing which method is best suited to the type of procurement you are considering. Let's quickly go over each method.
Small purchases are typically used for simple requirements that are not estimated to exceed the simplified acquisition threshold, currently set at $100,000. This method utilizes simple and informal procurement procedures and processes for obtaining price or rate quotations. An adequate number of vendors who will qualify to do the work are contacted to submit price quotes or cost estimates. Usually the method is by phone or through written request for quotation.
Sealed bid, or otherwise known as formal advertising, is a bid process that is advertised publicly to ensure maximum competition is achieved. A firm fixed-price contract is the only contract type allowed. Bids are opened publicly and a written firm fixed-price contract is awarded to the lowest responsive and responsible bidder.
Next, competitive, also known as negotiated proposals, is used when a sealed bid process is not appropriate. This method is used when an exchange with the offerers is necessary and a contract type other than fixed-price is intended. The solicitation will identify evaluation factors to rate and rank proposals, and will be publicly advertised to ensure maximum competition is achieved.
And non-competitive proposals. Non-competitive proposals are procurements solicited from only one source or when the agency received inadequate competition. EDGAR prescribes specific exemptions for when non-competitive proposals may be used.
If you're interested in knowing more about the methods of procurement, you can refer to the applicable parts of EDGAR for more detailed information.
The last procurement requirement we will discuss today is cost and price analysis. Cost and price analysis is thereview of an offer's cost and price information to ensure that each element of the proposal is reasonable, allowable, and allocable. This process is paramount to the vendor selection process. Procurement staff must ensure that costs and price analyses are performed on all procurement actions, including contract modifications. Cost and price analysis is also required for all sole-source contracts and when adequate price competition is lacking.
This completes our refresher segment on EDGAR procurement standards and requirements. I will now turn it over to Otis to discuss common weaknesses found in grantee agencies' procurement operations, after which we will then discuss the best practices for creating an efficient, effective, and accountable acquisition process that grantees and sub-grantees can adapt to address some of these deficiencies. Otis?